Reaching Upwardly Mobile African-Americans
For five consecutive years, the number of African-Americans who owned stocks increased. But that ended this past January and February.
This year, only 61% of blacks had money in the stock market, down from 74% last year and approaching the 57% level of stock ownership by blacks in 1998, according to the sixth annual Ariel/Schwab survey of black and white households earning more than $50,000 annually.
White stock ownership is at 79% this year, which is virtually unchanged over the last six years, according to the survey.
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Mellody Hobson, president of Ariel Capital Management Inc., Chicago, says the survey, co-sponsored by Ariel and The Charles Schwab Corp., San Francisco, indicates that after experiencing their first bear market, and an especially severe one, many black investors retreated to their conservative bias.
But, she feels it is inevitable that African-Americans will return to the stock market and financial services, in general, once the economy turns around.
“We continue to be an untapped market, in general, for financial services, but the prospects tend to be very good in terms of attracting the African-American sector,” Hobson says.
“As the economy continues to recover, it will be a reason for us to come back to the market.”
But, financial services companies dont have to wait for the economy to improve to start vying for the business of this segment, according to Hobson. In order to attract the African-American market, insurers should send out materials that are less sales in nature and more educational in tone, she says.
“The main thing is to continue to stress education so we can continue to build on our knowledge as it relates to our understanding that bear markets are a part of financial markets,” Hobson says.
“Historical context is helpful in reassuring people that the market goes both ways.”
Bill Hill, a public sector manager in the Detroit office of Colonial Supplemental Insurance, Columbia, S.C., does not agree that African-Americans have turned away from financial services as a result of the bear market.
“The downtrend had an impact, but we continue to move more and more into the mainstream of the economy that we are always going to be a part of,” he says.
He concedes that advertising and communication are not directed to the African-American community in the way they are to the general population.
Moving away from “kitchen-table marketing” and toward worksite marketing is a smart way to reach this market, Hill says, because most middle-income African-American families are two-income households with no one home to host a kitchen-table meeting.
Although anecdotal evidence suggests to some there has been no departure of the African-American consumer from financial services, the Ariel/Schwab survey suggests the reverse is likely true.
Hobson says the reason for the retreat is that African-Americans largely felt that with high unemployment and a sluggish economy, they did not have the “luxury of investing, whereas our white counterparts” understand that fluctuations are part of the natural workings of the market.
Pepper Miller, president of market research and consulting firm, The Hunter-Miller Group Inc., Chicago, says although many African-Americans are increasingly savvy about the stock market, even the most sophisticated tend to have doubts.
“We still have skepticism about the stock market and investments, even though were doing better at learning and getting information via companies that use black churches as a way to reach us,” she says.
“There are many black investment clubs that grew out of church, but still many of us lack information about the stock market,” she adds.
This disconnect is due to blacks coming into the stock market, for the most part, only recently, Hobson says.
“Many of us havent grown up in homes where the stock market was discussed,” she says, stressing that educational materials are important, because “knowledge is power.”